Posted: 18 Dec. 2019 05 min. read

Meeting halfway

Energy and Resources companies are improving the way they do business with Indigenous suppliers

When selecting suppliers, large companies hold significant power to shape the market and deliver alignment to broader organisational objectives. For the growing number of Indigenous-owned businesses in Australia, winning contracts is not just an opportunity to expand their business – It can have immediate and far-reaching impacts on their families and communities.

With “social license to operate” now an imperative, many organisations are seeking ways to enhance their public image. This is particularly pertinent for energy and resource (E&R) companies, who – often operating on native title land – are expected to demonstrate a long-term commitment to their local communities and deliver on a social license to operate.

E&R organisations are responding by examining how they engage with Indigenous suppliers and where the improvement opportunities lie.

What are the barriers to Indigenous procurement for large E&R companies? 

The issues faced by the buyer’s side remain complex. For example, procurement managers must: 

  • Balance Indigenous supplier targets against other potentially competing targets (such as supply base reduction, lowest price, improved safety and reliability, extended payment terms, improved environmental footprint and sourcing from overseas suppliers)
  • Be vigilant of a practice known as “Black cladding” [1] (non-Indigenous businesses presenting as Indigenous-owned in an attempt to benefit from positive discrimination)
  • Invest time to find and develop suitable suppliers so that they can meet the buyer’s standards, scale requirements and service-level terms and conditions

Similarly, suppliers may also face several challenges, including:

  • Delivering large and complex statements of work
  • Relative inexperience compared to incumbents and/or longer-standing organisations
  • Payment periods which are too infrequent to support cash flow in small and startup businesses
  • Limited resources to direct towards compliance activities (I.e. Satisfying clients’ high training and recruitment benchmarks including safety and risk standards)

What are large companies doing to overcome this?

A number of E&R companies are making significant positive strides.

Some are finding success with “quick win” approaches such as:

  • Offering shorter payment cycles 
  • Disaggregating statements of work into more accessible work packages
  • Allocating entire spend categories exclusively to Indigenous businesses to allow them the opportunity to enter the market and provide certainty over future requirements or,
  • Driving more robust processes through the procurement cycle which mandate measures, such as a requirement to seek Indigenous suppliers before going to market

At a strategic level, these buying organisations are beginning to form dedicated local content teams to champion initiatives within the organisations themselves. Investing in select Indigenous supplier relationships (such as through secondment programs) can also facilitate supplier capability uplift. The executive mandate of the Indigenous procurement agenda can galvanise the organisation towards this common goal which can be supported by adjusting staff performance metrics to reflect its pursuit of these targets.

The key is finding approaches which offer tangible and lasting results. Perhaps the most powerful change is adopting a mindset shift from viewing Indigenous procurement as a compliance activity to an opportunity to create real impact. 

When it comes to tackling this challenge, there is still a significant way to go. To deliver lasting change, it is the responsibility of large organisations across all functions, not only procurement, to continue to ambitiously prioritise and invest in their Indigenous agenda.

Meet our authors

Lauren Witherow

Lauren Witherow

Analyst

Lauren is an analyst in Perth’s Supply Chain and Procurement Consulting practice. Having worked with procurement functions across a number of industries, Lauren is developing a growing interest in helping these teams uplift their capability allowing them to provide further opportunities for Indigenous and emerging suppliers. 

Chris Riley

Chris Riley

Director

Chris is a Director in Perth’s Supply Chain and Procurement Consulting practice with over 20 years of blue chip experience across a variety of geographies and industries. Chris has a track record of delivering major procurement programmes and innovative, value creating strategies via effective collaboration with internal & external stakeholders.